Introduction

The Canadian property and casualty insurance industry consists of 198 private companies, with direct written premiums of $54.7 billion in 2017. The premiums are well dispersed, with no company having a market share of greater than 15.46 percent. The expenses, claims, and taxes from 2011 to 2017 averages 91.3%, leave 8.7% of profit.

Canada considers a loss catastrophic when losses exceed $25 million or more. Storms and floods account for most of the catastrophes, including winter storms, hail and lightning.

In Canada, the term agent is interchangeable with the term broker; property and casualty insurance may be referred to as general insurance, and terms may vary by province.

Regulation

Insurance in Canada is subject to regulation at both the Federal and Provincial level. There are thirteen provinces. Each province has its own regulatory department, similar to the state insurance departments in the U.S. Each department regulates insurance for that province and enforces the regulations and statutes created by legislation. The Federal government–through the Office of the Superintendent of Financial Institutions–oversees the solvency of most insurers. The provincial superintendents regulate those companies that do business only in one province.

The provincial superintendents administer the Insurance Acts of their province. These acts provide the superintendents with broad control over the insurance industry in a particular province. Provincial superintendents regulate the licensing of agents, brokers, and independent adjusters. They regulate the insurance products, market conduct, and regulate solvency of those insurers incorporated within the province, as well as claims handling, consumer complaints and rate approval. As in the U. S., the regulator may issue notices, bulletins or guidelines on a variety of issues affecting the industry.

Regulatory activities in Canada are being driven in part by the International Association of Insurance Supervisors “Insurance Core Principles”. These principles are influencing market conduct regulations, which govern the treatment of customers among other things. Because of this, the Canadian insurance market is becoming more consistent with regulations around the world.

Types of Insurance Available

As in the U. S., Canadians may purchase commercial and personal lines coverage. Auto insurance accounts for roughly half of the insurance written by P&C insurers. The number of private P&C companies writing auto insurance is approximately 108, with government-owned insurers in British Columbia, Saskatchewan, Manitoba and Quebec providing the mandatory coverages required in those areas as well as some additional coverages.

Auto insurance is mandatory in Canada as it is in the U.S. The mandatory coverages are accident benefits, which provide coverage for injuries sustained in a collision. Medical care, rehabilitation, lost income, funeral expenses and survivor benefits are available. This is referred to as “Section B” benefits. These benefits are paid on a no-fault basis; each person in an accident will file a claim with his own carrier for injury or damages. Most provinces also allow the not at fault party to sue the at-fault driver for damages, although in some provinces the injuries must exceed a certain threshold before this can occur. Manitoba and Quebec are pure no-fault, so there is no right to sue the other party. The remaining provinces combine no-fault and tort.

Third-party liability is mandatory as well, and covers the insured if he causes injury or death, or damages property of others. Unlike the U.S., the Canadian minimum liability limits are much higher, with many provinces requiring $200,000. In the U.S., the highest limit required by any state is 50/100/25, required by Alaska and Maine. All other states have lower limits.

Uninsured motorist coverage is also mandatory, while collision and comprehensive are optional except for Saskatchewan and Manitoba. In these two provinces, collision and comprehensive are mandatory coverages.

The standard ISO personal auto policy provides coverage for Americans traveling to Canada. Before going to Canada, Americans must obtain a Canadian Non-Resident Inter-Province Motor Vehicle Liability Insurance Card from their insurer. Most agents have these in their offices. This card verifies that the American driver carries liability limits at least as high as those required in the province(s) to be visited. The ISO policy expands to meet the required limits of any province or state that the insured is in if the required minimum limits exceed those that the insured currently has on his policy.

Canadian citizens must purchase auto insurance in the province where they reside. As with American policies, Canadian policies do not provide coverage in Mexico. But, Canadian policies do provide coverage for citizens traveling to the U.S. Residents of Quebec receive worldwide bodily injury liability coverage through the Société de l'assurance automobile du Québec (SAAQ).

The second largest line of P&C coverage is homeowners or personal property coverage. Coverage is provided on either an all-perils, broad-form, standard, basic or named perils, or a no-frills policy. The all-perils is similar to an open perils policy, where the dwelling and contents are covered from all but excluded perils on the policy. The broad form provides open perils for the dwelling, and named perils for the contents, similar to an HO 03. The standard, basic or named perils policy is just that, named perils coverage for both the dwelling and contents for specific named perils. The no-frills policy provides very basic coverage for properties that do not meet an insurer's usual underwriting standards.

The business insurance available is standard. Commercial general liability, commercial property, directors' and officers', errors and omissions, professional liability, and business interruption are the major lines available. Smaller businesses without risk managers will look to their agent for advice as to what their exposures are and how they should be covered.

Major Issues

Each line of business has particular areas of concern, which are similar to the concerns in the U. S. Auto concerns are affordable and effective coverage, crime, auto theft, road safety, and adapting to technological innovations. It appears that the Canadian market is behind the U. S. market in adapting to the issues of ride-sharing and vehicle-sharing. Canadian regulations are more restrictive and consumers do not have the ability to file claims, pay premiums, submit damage photos and receive proof of insurance online as is available in many U.S. states. Canada has the same problems in sorting out the autonomous vehicle issues as the U.S. does; it is a complicated endeavor.

Home concerns center around climate change resulting in more flooding and earthquakes. The flood issues are the same as those in the U.S., greater flooding, and the need to educate consumers on coverage and mitigation, building codes, land-use planning, and preservation of wetlands.

Cyber liability is a large concern for business insurance, and cyber security is one of the fastest growing markets. There is still much to learn regarding cyber risks and strategies to prevent loss and exactly what kind of coverage is needed. Other major issues are cargo theft and natural catastrophes and climate change.

Licensing

Like the U.S., Canada requires licensing for agents, brokers, and independent adjusters. The licensing requirements vary by province. A number of provinces have various levels of license with each level granting more authority to act. For example, in Saskatchewan, agents or brokers can have a license for selling Restricted Auto policies. With a Level 1 license, the person is limited to the sale of auto insurance, excluding commercial autos. This person cannot manage an agency, act as a supervisor, or act in the transaction of far/commercial lines unless supervised by a Level 2 or 3 licensee.

A Saskatchewan Level 2 licensee must complete the classes of a Level 1 licensee plus 4 additional courses. This level of agent cannot manage an agency. A Level 3 licensee must complete the requirements for Level 1 and Level 2 licensees, and complete an additional course. This level licensee may not manage an agency unless he has at least 2 or 3 years of experience as an agent within the past 5 years, or may not manage or supervise more than three office locations.

The same is true of adjusters. Different provinces have different requirements in order for adjusters to be licensed. For example, New Brunswick has three levels of property adjusters for first and third party claims of damage or loss to property other than ocean marine or automobile. There are three levels of automobile physical damage adjusters, probationary, assistant, and property damage adjuster. The first level is a probationary level that can only act under supervision and has limited authority. The second level adjuster still must act only under supervision, but has more authority than a first level adjuster has. The third level can act independently.

The property damage adjuster can adjust first and third party claims for damage to or loss of property for everything other than automobile or ocean marine. There are then three specializations; automobile physical damage adjuster who handles first and third party automobile damage claims, automobile accident benefit adjusters who handle accident benefit claims, and bodily injury adjusters who hand third party claims of bodily injury or death. A fourth level general adjuster can adjust property damage, automobile physical damage, automobile accident benefits or bodily injury claims.